A couple of weeks ago I urged our good friend the RBA Governor, Mr Glenn Stevens to “just do it!”
What am I talking about?
Well, the INCREASE OF INTEREST RATES.
It looks now almost 99% that this will happen on guess what day..?
The first Tuesday of next month… which is Melbourne Cup Day.
I good time to lift rates – probably no one will notice that much and by the time they do, it’ll be almost forgotten.
So why are they taking action on this?
The only reason I can see to lift rates is to kill off the surge in the property market which they and the government helped fuel 12 months ago anyway.
However, as an investor here’s what I see…
Firstly, CONFIRMATION OF A PROPERTY BOOM in its early stages.
Secondly, confirmation of LIKELY INCREASES IN PRICES in the next 12-18 months of 10-15%.
Now of course not all properties will do this, you have to know exactly which style of property you should be buying that will best benefit in this current economic climate.
I don’t have enough time to deal with the exact property-selection right now, but what I want to do is urge you to seriously look at the real estate market – because if you miss out on the next 12-18 months, based on a purchase price of $400,000 – $500,000 YOU ARE POTENTIALLY LEAVING $50-$100,000 ON THE TABLE.
For some individuals it takes a whole 12 months of slogging it out in a job to get this sort of income… many take 2 years.
On what am I basing this view?
It’s really simple.
Interest rates WILL go up. That’s almost a certainty. This will scare many potential owner-occupiers not to sit on the sidelines and watch, but to jump in the market and buy now.
The fear of missing out.
Missing out on historically low interest rates (even with the increase) and being shut out of the real estate market… maybe forever.
I know, I know, I know… Many of you will have an immediate knee-jerk reaction and say that the winding back of the first-home-owners grant will slow the market down anyway.
I don’t think so. Here’s why…
If we look back historically, I remember a time when the RBA in 1989 wanting to do the same thing and took interest rates from 10% to 17%, trying to kill off the real estate boom.
EVERY TIME THEY LIFTED RATES THE MARKET JUST KEPT GOING UP.
They lifted interest rates, market kept roaring.
Until eventually the cost of money was so great that it stopped the real estate market dead in its tracks almost overnight, around 1991.
…but here’s the thing.
The capital gains that were made as the market kept going were enormous.
Here’s something else that’s interesting to note… That surge in interest rates as well as real estate prices came 2 years after the famous 1987 stock market crash.
Hmmmmm…. Isn’t that interesting?
What happened in 2007? Yes, that’s right – the GFC. Where are we today? 2009.
Does history repeat?
So here’s my theory… and let me tell you it’s a little more than just a theory for me, because this time I’m going to ride the real estate market as interest rates climb and profit enormously as two key emotions kick in.
FEAR AND GREED.
What will you do?
Sit on the sidelines and watch?
Miss this, and you will be kicking yourself in 2 years.
Hey, let me tell you one thing. I’m not suggesting that property will go up forever, I think it will flatten out around 2010-2011.
But between now and then, HUGE profits are going to be made.
Look, right now we’re at a cash-rate of 3.25% and banks are lending at about 5.7%.
My prediction is that the RBA will have to go to AT LEAST 9% BEFORE THEY CAN SLOW THE IMMINENT PROPERTY BOOM.
From now until then, it’s your chance to take advantage of this unique period in history.
OK, there are other factors than the potential owner-occupiers jumping in the fear of missing out… and I’ll be covering lots more on that in the coming weeks.
If you read this email and you do nothing in the next 12-18 months in the real estate market, I can say some with some degree of certainty that YOU WILL NEVER HAVE ANOTHER OPPORTUNITY LIKE THIS.
So let me invite some discussion on this and you can reply below.
Signed with Success,